In this week's Off The Cuff podcast, Chris and Mish Shedlock discuss:
- Are We On Our Way To Tipping Into Deflation?
- We will be if we have another credit crisis
- We're At Record Levels Of Indebtedness
- So deflation would be painfully brutal
- Trumps Trade Wars Will Hasten A Deflationary Bust
- Economic growth will be even harder to achieve
- It's Time To Own Real Things
- Commodities are looking better and better
Recorded last week, Mike Shedlock explains why he sees an inevitable — and painful — deflationary rout ahead for world financial markets:
Inflation is an increase in money supply and credit. I think the important point is—because this is the way things work in a real life—that credit needs to be marked to market. Banks lend, and they have been lending, based on the value of forever-rising asset prices. Asset prices rise, so they lend more and more and more and more on those assets.
Eventually, when the market turns, we have debt deflation. People can't pay back their loans. They walk away from mortgages. They walk away from their credit card debt. They walk away all the other debts that they’ve accumulated. Banks become capital impaired or worried about becoming capital impaired, so they stop lending. And the process goes into reverse. This is what happened in 2008 and 2007.
by nedyne